The Federal Housing Finance Agency's proposed ban of so-called "private transfer fees" goes too far, according to a group dedicated to fostering successful community associations.
The draft regulation is an attempt to curb the growing and controversial use of the fees by private investment companies, which use deeds to require a purchaser to pay a percentage of the sales price to outside investors every time a property changes hands.
The proposed rule would ban Fannie Mae and Freddie Mac from purchasing any loan on a house, townhouse or condominium with a deed-based transfer fee, which is recorded along with the title and binding on subsequent purchasers, often for as long as 99 years.
But in so doing, the Community Associations Institute claims, the regulation would ensnare community associations, which have used the technique for years to help fund reserve accounts or community improvement projects, and make it difficult for as many as 11 million households to sell or refinance their homes.
The Alexandria, Va.-based CAI says there are more than 305,000 association-governed communities throughout the country. "We agree that private transfer fees should get regulatory scrutiny," said CAI Chief Executive Officer Thomas M. Skiba, CAE. "The problem is that the FHFA regulation would apply to any and all deed-based fees. If implemented as drafted, it would be catastrophic."
Close to half of the 1,252 communities responding to a CAI survey in September reported having deed-based fees. Extrapolating from that data, CAI estimates that as many as 11 million homes nationally are located in communities that rely on deed-based transfer fees.
